IPI Publication Press Release
IPI Policy Report - # 152
Related Publication Title:
Should We Tax the Internet?
Released by Sonia Hoffman on 03/28/2000
IPI Policy Report - # 152
Related Publication Title:
Should We Tax the Internet?
Released by Sonia Hoffman on 03/28/2000
Full Text
Quick Study
Executive Summary
Press Release (06/02/2000)
Press Release (03/28/2000)
Media Advisory (04/07/2000)
Media Advisory (09/05/2000)
Full Text PDF
Quick Study PDF
States' Internet Tax Prescription Based on False Symptoms
For Immediate Release. Contact Sonia Hoffman, 888-557-4IPI
Today’s Internet tug-of-war has states screaming over lost revenues. They’re whining that lost retail sales will have a detrimental affect on state budgets if they can’t tax the Internet—and now. But state revenues are increasing, not decreasing, according to a new study "Should We Tax the Internet?" by the Institute for Policy Innovation (IPI).
“The assumption behind the states’ argument is that if online sales increase, state revenues will decrease,” says author Dr. Merrill Matthews, Visiting Scholar at IPI. “That is not necessarily true. Both retail sales and state sales tax receipts have continued to grow during the decade of the 1990s, even with the growth of Internet sales.”
The states’ aggressive attempt to prescribe sales, access, use, or other tax concoctions for non-existent budget problems could kill current economic growth, presently spurred by competitive prices between retail and online sales. Without such competition, prices would be higher and sales would be lower—which would actually cost the states money.
How can sales tax revenues continue to grow while more people buy online?
1. Many purchases made online would not be taxed even if purchased at the corner brick and mortar store. For example, pharmaceuticals and airfare, two rapidly growing areas of online purchases, are not typically subject to the state sales tax.
2. Retail outlets don’t lose sales just because potential customers purchase via Internet. First, the product might never have been bought if the purchaser had to get in a car and go to the store. And second, online consumers are just as subject to impulse buying as those shopping retail—perhaps more so in areas such as technology products.
3. Online sales have a “multiplier effect” that spurs sales both online and in retail stores. For example, online sales are currently helping to keep inflation down, and this generates more economic activity.
While a consistent view of federalism and state sovereignty would acknowledge that states have the right—albeit limited by the Constitution and the courts—to tax the Internet, that doesn’t mean they should. Taxing the Internet now, when economic symptoms reveal booming revenues, would be a cold move.
This information is from a new IPI Policy Report, “Should We Tax the Internet?” by Dr. Merrill Matthews. Copies are available by calling Sonia Hoffman at (972) 874-5139 or by visiting www.ipi.org. The Author is available for interviews.
